Stocks are overvalued [General] - MarketTicker Forums


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Jstanley01 Posts: 8176 Incept: 2008-07-30 San Antonio, Texas	Quote: Stocks: The One Key In Finally Ending The Long-Term Bear Market Seeking Alpha June 15, 2012 Eric Parnell ...Many analysts often remark that stocks are inexpensive from a historical valuation perspective with the 12-month trailing P/E on the S&P 500 at 14.9x earnings. I would strongly contend, however, that such a conclusion is misguided when delving deeper into the details of the market... ...Applying a long-term trend line to the valuations bottoms associated with the last three secular bear markets to the likely deflation-then-inflation scenario today implies that we would need to see the current 12-month trailing P/E ratio decline to 8.4x earnings before we reach a final bottom in the current cycle... http://seekingalpha.com/article/661071-s.... ---------- You can't cheat an honest man. ~P.T. Barnum Last modified: 2012-06-15 09:02:37 by jstanley01 2012-06-15 09:01:36 Permalink
Aliveh Posts: 4043 Incept: 2008-01-18 Los Angeles	I like this article better... IMHO, CAPE (cyclically-adjusted P/E, i.e., 10-year trailing) gives a clearer picture... it says stocks are still overvalued http://greenbackd.com/2012/06/05/what-to.... 2012-06-15 09:05:36 Permalink
Jstanley01 Posts: 8176 Incept: 2008-07-30 San Antonio, Texas	Thanks for the link Aliveh. They're defining bear markets differently too. ---------- You can't cheat an honest man. ~P.T. Barnum 2012-06-15 09:23:06 Permalink
Expiredeternity Posts: 171 Incept: 2009-08-28 orlando	Extrapolating from that graph,^^ it looks like we are headed for a BULL market. That would make stocks undervalued....no? ---------- The toil of the many goes to the corrupt few. Last modified: 2012-06-15 09:39:11 by expiredeternity 2012-06-15 09:37:02 Permalink
Jocknomore Posts: 184 Incept: 2009-01-03 Chicago	In 2005 the S&P 500 was at the same level but GDP growth was 4.9%, now 1.9%. College graduate starting pay was $45,000 now $41,000. Unemployment was 4.62% now now 8.2%. These numbers do not add up. 2012-06-15 09:48:30 Permalink
Jstanley01 Posts: 8176 Incept: 2008-07-30 San Antonio, Texas	Expiredeternity, no. (From Aliveh's linked): Quote: ...Equity markets are presently experiencing an extended period of valuation contraction, manifesting as increasing earnings, falling cyclically adjusted price-to-earning ratios (�CAPE�) and a sideways market... 20.56 is not cheap. Despite over a decade of dropping valuations, a CAPE of 20.56 is presently still well-above long-term averages (the long-run mean is 16.43 and the long-run median is 15.84), indicating that the market is still 25 percent to 30 percent above those averages... But on their figuring of bulls/bears, a sideways followed by a bear would be unprecedented. ---------- You can't cheat an honest man. ~P.T. Barnum Last modified: 2012-06-15 09:51:16 by jstanley01 2012-06-15 09:50:17 Permalink
Txin1880 Posts: 4735 Incept: 2009-02-25 Texas	what it would only take 150+ years to pay for a share of Amazon with earnings ---------- Realization - Rage - Resolve - Rifles - Rope - Recovery - Rinse - Repeat 2012-06-15 11:54:27 Permalink
Aliveh Posts: 4043 Incept: 2008-01-18 Los Angeles	it's true bear-flat-bear would be unprecedented but CAPE > 40 in 2000 was also unprecedented...and we have a long way to go to hit a typical trough in the single digits. I personally like CAPE b/c it gets rid of a lot of year/year earnings volatility especially in rapid economic expansion/recession...it doesn't hurt that it was originally advocated by Ben Graham in the 1930s. Last modified: 2012-06-15 12:30:41 by aliveh 2012-06-15 12:28:23 Permalink
Jstanley01 Posts: 8176 Incept: 2008-07-30 San Antonio, Texas	Quote: ...unprecedented but CAPE > 40 in 2000 was also unprecedented... Fiscal and monetary intervention this go-round has been unprecedented too. So massive as a matter of fact, that I'd say any long-term bull/bear outlook has to be based on one's opinion of that intervention's ultimate success/failure. ---------- You can't cheat an honest man. ~P.T. Barnum Last modified: 2012-06-15 19:08:43 by jstanley01 2012-06-15 19:05:16 Permalink
Antone Posts: 7660 Incept: 2008-02-03 Seditionia, USSA	I think of this as all a big game of Jenga where it starts like a pyramid with a big base, but ends up with the complete inverse until that single point cannot hold up (leverage) the rest of the stack. It started out at the individual, private company, larger company, municipal level, then to county, state, country, continent and now worldly level. Good times. ---------- As if anything has changed: Wir sind gefickt. Last modified: 2012-06-16 03:38:43 by antone 2012-06-16 03:36:16 Permalink